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Gains of the past three years have bypassed many unemployed Queenslanders

The Australian Bureau of Statistics labour market numbers for July 2018 reveal solid employment growth on one hand but gains having bypassing our State's unemployed on the other.

Queensland's stubborn unemployment rate has been unable to consistently break through the six per cent barrier and contrasts with a national unemployment rate that is steadily tracking towards what would be considered close to full employment.

Over the past 12 months the national unemployment rate has decreased from 5.6 per cent to 5.4 per cent where as the Sunshine State's unemployment rate has remained steady at 6.1 per cent.  If we compare over a 36 month period the separation between Queensland's unemployment rate and the national rate is even more apparent.  Three years ago the national rate was 6.1 per cent the same as Queensland's, now its 0.7 per cent lower where as our rate is pretty much unchanged.  

Quite simply we are not making the gains in reducing our unemployment rate that is being experienced in other States.  

The challenge for Queensland is that employment growth is occurring but it is also starting to ease.  QLD's 12 month growth to July 2018 was 2.2% and has now slipped below the 20 year long term trend and compares to New South Wales (3.2 per cent) and Victoria's 2.5 per cent.

At the same time there is a steady reentry into the workforce as Queenslanders register as unemployed and we have southerners moving here and either soaking up some of the newly minted jobs or also registering as unemployed. 

Much emphasis has been placed on employment growth but we need to also focus on whether our unemployed are benefiting from the economic growth that has occurred.  It would appear much of the employment and economic gains of the past three years have bypassed many unemployed Queenslanders.

All figures sourced from ABS Catalogue 6202.0

Overseas Migrants to Queensland: Where the bloody hell are you?

As Australia’s population clock ticked over 25 million at 11 pm on the 7th August 2018 it is important to understand how this milestone has been achieved. In short Australia continues to be the lucky country and the heavy lifting of our increase comes from overseas migrants wanting to get a piece of the action despite recent integrity measures by the Federal Government to make it more difficult for Australian businesses to access skilled migrants.

However in analysing the data I noticed an interesting aberration for Queensland. 376,650 Australians in 2016-17 elected to pick up their belongings and relocate to another State.  This is referred to as interstate migration. Of this amount Queensland attracted 26.1 per cent or 98,410 persons from other States, well ahead of a per capita share (which for Queensland would be 20 per cent).  That is Queensland is a net recipient of interstate migration flows. Reasons for interstate migration to Queensland are many and include to be with family, to take up a job opportunity, lower cost of living and housing, and lifestyle considerations such as our wonderful sunshine and beaches.

What is interesting to my mind though is Queensland only attracted 16.4 per cent or 88,270 international migrants of the total 538,820 persons migrating to Australia (well under our theoretical per capita share).  Obviously many of these overseas migrants didn’t get the memo.  Australians who are arguably more informed of the place to be are locating en masse to Queensland yet overseas migrants continue to flow to both Sydney and Melbourne.

It is probably just as well though as SEQ continues to groan under population pressures.  If our State over the past ten years had of attracted the same ratio of overseas migrants as we did interstate migrants then we would have an additional 342,000 persons residing in the Sunshine State. This represents a massive untapped economic opportunity but it also represents a potential disaster for our State’s infrastructure. 

So a good question to overseas migrants may well be ........  where the bloody hell are you and what can we do to keep you there!*

Seriously though interstate migration to Queensland is now well and truly bouncing back after some difficult years for our economy but I am concerned that Queensland appears to be experiencing a declining share of overseas persons migrating to Australia. It is probably time to get on the front foot and start spruiking what we have to offer but also who we need in terms of skill shortages.

*For the record I am pro-immigration believing it to represent a wonderful opportunity to enrich our community as well as increase demand across the economy. 

All figures sourced from ABS Catalogues 3412.0 and 3101.0

Queensland should support the NEG – when perfection and politics are the enemy of good

In true Better a diamond with a flaw than a pebble withoutfashion - Queensland should support the proposed National Energy Guarantee this Friday when COAG's Energy Council meets to consider it.

If you believe the hype - the National Energy Guarantee will deliver lower electricity prices, improve reliability, encourage the right investment, provide certainty, reduce emissions without subsidies, taxes or trading schemes whilst at the same time being truly neutral to solar, wind, coal, gas, batteries or pumped storage.

To quickly provide background - the NEG is essentially made up of two guarantees for energy retailers across the National Electricity Market:

  • A reliability guarantee will be set (by Australian Energy Market Commission and Australian Energy Market Operator) to deliver the level of dispatchable energy needed in each state; and
  • An emissions guarantee will be set to contribute to Australia’s international commitments. The level of the guarantee will be determined by the Commonwealth and enforced by the Australian Energy Regulator (AER).

What I particularly like about the NEG is its simplicity – energy retailers will have to contract in and buy a set level of reliable energy to keep the power on and a set level of low-emissions energy to help the energy sector hit its share of the Paris Agreement emissions reduction of 26-28 per cent by 2030.  The beauty of this policy is that it can be scaled up or down for the government-of-the-day's emissions ambitions and accordingly has a chance of receiving bi-partisan support.

Green groups will naturally argue that the NEG does not go far enough to cut energy sector emissions.  This is what I mean by it will never be perfect so surely something good is better than no policy at all. Representatives of Australia's biggest employers, small businesses, the energy industry and the agricultural sector have rallied behind it and have urged federal, state and territory leaders to put aside politics and ideology and support the implementation of the NEG.  Together these organisations represent businesses that employ five out of six working Australians and contribute more than 80 per cent of economic output in this country. To my mind that's quite a voice and should listened to.

Unfortunately it may be process that ends up being the enemy of good.  If agreed to by the COAG Energy Council, Energy Minister Josh Frydenberg then has to get agreement from the Coalition’s party room.  This is not only problematic in getting the Coalition on the one page but the Palaszczuk Government now has hesitation because the NEG can be tinkered with following COAG agreement  - equating it to a blank piece of paper that the Premier is not prepared to sign off on.  Whilst not entirely correct, the Premier’s comments do have some merit and I would think it not too unreasonable for the Coalition to respect the potential agreement arrived at this Friday. 

But at the same time, this is not grounds for the State Government to play politics itself and baulk at policy that will yield benefit on prices, reliability, certainty and the planet. The NEG is not perfect but it is certainly better than no policy at all or uncompromisingly partisan policy. 

The NEG summary:

  • Retailers must have contracts in place to support a minimum amount of dispatchable energy to meet consumer and system needs.
  • The average emissions level of electricity sold to consumers must meet the electricity sector's share of Australia's international emissions reduction commitments.
  • Australia's current target is to reduce 2005 level emissions by 26 to 28 per cent by 2030.
  • The Energy Security Board estimates typical household bills will fall by an average of $110-$115 per year over the 2020-2030 period.
  • Renewables will make up 36 per cent of national energy market generation within 11 years, up from the current 17 per cent.
  • Without closing any coal-fired power stations, the share of coal-fired power generation will fall to 60 per cent from 75 per cent.

 

Critical Appraisal of Queensland’s Labour Market

Queensland’s labour market finds itself in a peculiar situation: it has experienced very good employment growth yet our unemployment rate remains stubbornly above six per cent.

Queenslanders should in theory be highly concerned that our State’s unemployment rate remains 0.7 per cent above the national average of 5.4 per cent.  The gap between our unemployment rate and the national average is widening despite the gains made in job creation.

QEAS takes a look at some of the underlying influencers contributing to our stubbornly high and cemented unemployment rate of 6.1 per cent.

Queensland’s labour market has experienced steady growth in 2017-18 with total employment growing in the12 months to June 2018 by 2.6 per cent, the same level of growth that has occurred nationally.  Whilst employment growth has hit its peak for this cycle an additional 62,700 jobs over the past 12 months is something to be very happy about.

The composition of this growth has also been very good with a good split between 39,900 jobs being full-time positions and 22,900 being part-time.   Despite all the hullabaloo only 10 per cent or 6,204 of these 62,700 jobs were courtesy of the State Government increasing the size of the public service (a story for another blog).  It is the Queensland private sector that has done the heavy lifting in this improvement which is again a good thing.

One of best indicators for overall economic growth is the number of hours worked and this has also grown over the 12 months to June 2018 by 5.3 million hours indicating additional demand for labour as domestic economic activity has lifted.  So arguably the State’s labour market performance has been very good. 

Yet there has been a considerable disconnect between this jobs improvement and it benefiting our State’s unemployed persons. Some quicks stats here for context:

  • The number of registered unemployed persons between June 2017 and June 2018 actually increased by 1,800 persons to 161,200 persons.
  • Our unemployment rate between June 2017 and June 2018 only decreased from 6.2 per cent to 6.1 per cent whilst our underemployment rate (the number of persons looking for additional hours of work increased from 9.0 per cent to 9.2 per cent.   

So what is going on? Well the answer to this almost certainly relates to our State’s participation rate and also interstate migration. The participation rate is in itself a great measure of confidence in the labour market and over the 12 months to June 2018 it rose from 65.3 per cent in June 2017 to 65.8 per cent and is now higher than the national rate of 65.6 per cent.

As employment creation has occurred more persons have returned to our State’s labour market looking for work.  These person’s would have previously been out of the labour market either on home duties or in education. For every job being created, we have had a new person re-entering the labour market either taking one of these newly created jobs and in turn denying a job to unemployed person or registering as being unemployed in the expectation that they will find work soon.  In effect there has been no net change.

In addition there is also no question that our State’s unemployed persons are in competition with persons located interstate and overseas.  Population always flows towards employment opportunity and both overseas and interstate migration have surged across the period of Queensland’s labour market improvement.  Chances are some of the 62,700 jobs created have gone to interstate and overseas workers rather than drawing down on our State’s unemployed.

So should we be alarmed that the gap between our unemployment rate and the national average is widening?  The answer is no - in reality we have had solid jobs growth, a participation rate rising and strong population growth courtesy of our labour market improvement.  We can always be doing better and no stone should remain unturned whilst 160,000 plus Queenslanders find themselves out of work. In addition our youth unemployment rate is at 13.2 per cent more than double the State unemployment rate.

However and in summary, the 2017-18 financial year was a good one for Queensland's labour market.

If only there was another word for innovation

Last week the Australian Bureau of Statistics released their latest snapshot of Australian business innovation.

Innovation is a widely used term but not necessarily widely understood particularly by small business.  It is defined as the development or introduction of new or significantly improved goods, services, processes or methods. Innovation can be seen in a variety of forms, from a major breakthrough such as creating and bringing a new product or service to the market, to a series of smaller innovations such as finding better or more efficient ways of working and becoming more profitable.

As innovation is often seen as a continuous process and aspects can be intangible, it can be incredibly difficult to measure however the ABS goes about doing this by asking businesses whether they are engaged in innovation activity. Key points from ABS include:

  • The number of businesses engaging in innovation activity is increasing across Australia;
  • Almost two in five businesses introduced innovation activity into their business in 2016-17;
  • Larger businesses are unsurprisingly more likely to engage in innovation than small business but innovation in small businesses is still widely prevalent despite not being regarded by them as innovation;
  • The main benefits of innovation are in the areas of increased revenue and improved customer service;
  • The main impediments to innovation particularly for small business are lack of additional funds and skilled persons; and
  • Over half of all innovation-active businesses sourced their ideas and information for the development of innovation from within the business or another owned by the same company.

The results confirm that innovation is evident in many small businesses yet when talking to them many do not see themselves as innovative.  Unfortunately but understandably many small businesses roll their eyes when the word innovation is mentioned  – in short it is a term that has been overused and the programs that have been provided by Government have not hit the right audience. If only there was another word for innovation that does not conjure up confusion and also frustration following an innovation agenda across both Commonwealth and State Governments targeted towards start-ups and 'Tier One' innovation to the detriment of existing Queensland small businesses.

A key take away is that innovation needs to be redefined and refocused as more than just 'Tier One' activities such as R&D and applying for / or registering a patent for a new product or technology. Programs need to pivot towards the adoption by small businesses of everyday operational processes or adaptation or progression of process and methodology.  When this occurs small businesses will think considerably more favourably upon the rhetoric surrounding innovation.

Estimates Hearings are one of only a few checks and balances for Queensland's Unicameral Parliament

The 2018-19 ‘Estimates Hearings’ for the Queensland Legislative Assembly commences today and runs for the next two weeks.  These are one of only a few checks and balances that the Sunshine State’s unicameral Parliament has to hold the State Government to account.

The estimates process helps the Legislative Assembly to scrutinise the Government’s proposed expenditure in the State Budget for both the previous year and year ahead. Since 1994, the Parliamentary Committees (seven of them please see below) have undertaken the estimates process. 

The Minister and the Director General / CEO of the relevant Department or Authority must attend the Committee’s hearings and are questioned directly by Committee Members and other sitting Members regarding the proposed expenditures for their relevant portfolio areas.

Members of the Committee are allowed a wide scope in their questions ranging from items of detail to broad policy matters.

When the Committee hearings are completed, the Members meet to discuss the information gained and compile a final report which is then tabled and debated in Parliament.

This is in theory is a great opportunity to get to the detail that is often glossed over by Government Ministers and their spin doctors.  My sincere hope is that this year's hearings are marked with substance and not the games that have unfortunately occurred in recent years that have obfuscated the truth coming to light.  Time will tell. 

Update 1.30 pm 31 July 2018:

Unfortunately it appears my concerns over this process were well founded ….. Respected ABC Journalist Chris O'Brien writes:

The constant use of standing orders against questions containing arguments, imputations, opinions or hypothetical matters was the worst since the estimates process began in 1994, according to long time observers.

Analysis by the ABC showed 20 out of 32 non-government questions to Premier Annastacia Palaszczuk on the first day of hearings were hindered by government members trying to block or weaken the attack.

Rather than a free-flowing examination of the Premier's performance, there was constant interference from Labor committee members challenging, disrupting or ruling questions out of order.

Independent observers calculated that of the 89 minutes given to non-government MPs in the session, 39 minutes were lost to interruptions.

http://www.abc.net.au/news/2018-07-31/qld-budget-estimates-ran-like-protection-racket-expert-says/10029036

 

Tainted for Life from Driving in Europe

Many readers will be aware that I recently spent a month travelling in Europe.  Over this period I logged 5,733 kilometres driving from Rome to Bergen in Norway and back down to Amsterdam.

This was a wonderful experience but has unfortunately left me tainted for life when it comes to driving. On many occasions I marvelled at how incredibly efficient the road network operates on this Continent.

In a former life and when campaigning for the Olympics I drove multiple times between Brisbane and Melbourne return.  I have also driven extensively up and down the Bruce Highway and in other parts of regional Queensland for work.  By no means am I expert but I have logged what I regard as a fair number of road kms.

Quite simply the contrast between European and Australian motoring behaviours could not be wider. Key observations from my recent experience included:

  • The overarching obligation to stay right unless overtaking;
  • Lorries forced to stay in the right hand lane and unable to overtake on key stretches of highway/autobarn and at certain times of the day;
  • Lorries speed limited to stay under 80 km an hour on highways; and
  • Both digital surveillance and police presence to enforce road rules.

What is paradoxical is that by slowing and restricting the road freight task it actually speeds up the overall movement of freight and passenger vehicles.  There is no longer the perpetual changing of lanes, the acceleration / deceleration or the inability to overtake slower vehicles.

In short the passenger and freight task works in Europe and it is has nothing to do with the actual roads. We saw some of these concepts introduced in SEQ when the Commonwealth Games was underway.  Surely there must be merit in extending this concept both into the future for the M1 and across the Bruce and for other major corridors in Queensland.

This is both a liveability issue and also an efficiency issue for our Country’s freight task. I have seen how it should work and then I have seen how it works in South East Queensland. …. hence I am tainted when driving.

Why Queensland should support changes to Australia's GST distribution arrangements

 

 

Earlier this month the Federal Government released its interim response to the Productivity Commission’s (PC) final report on horizontal fiscal equalisation (HFE) ie how GST receipts are carved up among Australian States. Both the PC Report and the Government’s response were released on the same day.  See here for earlier QEAS discussion on this process.

 

Unsurprisingly the Productivity Commission has found that although the current GST distribution system functions well and achieves high levels of fiscal equity, it has resulted in perverse outcomes when there is a significant shock to our economy. This has been most significant for Western Australia when the effect of the mining boom resulted in a fall in its relativity, which eventually reached 30 cents in the dollar per person of GST and saw its distributions smaller than jurisdictions such as the Northern Territory, Tasmania and South Australia (refer to the above graph).

 

In its final report, the PC proposed moving to a new equalisation based on the ‘average of all States’ (ETA), instead of the current system of equalising to the strongest State. This approach would be disastrous for Queensland robbing us of $1.6 billion each year.  The PC’s recommendation to change the HFE standard to ETA is premised on analysis that this change would provide the greatest incentive for a small number of large States to undertake efficiency-enhancing tax reform, particularly a ‘swap’ of stamp duty revenue for increased land taxes.

 

However, a godsend has been given to Queensland, the Federal Government has chosen not to proceed with the PC's recommendation to equalise to the standard of the average off all states and territories.  Instead, it’s preferred model involves moving to another new benchmark that will ensure the fiscal capacity of all States and Territories is at least the equal of NSW or Victoria (whichever is higher). Great news for Queensland as evidenced in the below table where our relativity (i.e. how much money we get back from each dollar of GST raised) remains effectively unchanged.

 

 

The Federal Government believes benchmarking all States and Territories to the economies of the two largest states will remove the effects of extreme circumstances, like the mining boom but in a way that is fairer, more reasonable, more sustainable, more predictable and in a manner that will ensure all State or Territories are left financially better off.  The Federal Government’s plan seeks to transition Australia’s HFE system over eight years and will ensure all States are better off by making supplementary and untied payments sourced from its other revenues to the GST pool in the interim years. 

 

Pleasingly, moving to a new equalisation benchmark through boosting the GST pool with additional payments, will be actioned by a new Intergovernmental Agreement between the Commonwealth and the States.  This is profoundly important as the new arrangements will not be subject to political decision making year to year and will be set in stone.  A change of this scale will require consultation with all the states and the Federal Government has convened a special meeting of the Council on Federal Financial Relations (ie all the State Treasurers and the Commonwealth Treasurer) in September, with a view to coming to a final agreement on transition arrangements by the end of this year. 

 

The drawback to this solution, as QEAS sees it, is a national one and relates to taking money from other revenue areas of the Federal budget to action the change. This is problematic in that it comes at a time when Government’s from both sides of politics are struggling to deliver a surplus whilst debt is rising.

 

However, given that Queensland was potentially going to see a cut to its GST receipts by up to $1.6 billion under the PC proposal the Federal Government’s response appears a very good one for the Sunshine State and should be supported.  On the face of it Queensland has dodged a massive bullet and should be relatively unscathed from this process for at least a decade.  On this basis, it will be important for the State Government to put politics aside and approach the meeting in September with an agenda based solely on what is best for Queensland. If this occurs our support for the new arrangements should be a ‘no-brainer’.

 

25 changes that commence 1 July 2018 for Queensland Businesses

For the Queensland business community numerous new legislative obligations and other initiatives commence Sunday 1 July 2018. Some of these will benefit you whilst others unfortunately will not.  QEAS has provided below a list of the more prominent changes that will occur.

Relevant benchmarks to contrast the changes against are forecasted (2018-19) CPI growth of 2 per cent, wage price growth of 2.5 per cent and Queensland economic growth of 3.0 per cent. (Source: Queensland Treasury)

Employment

  • The national minimum wage will increase by 3.5% to $719.20 per week or $18.93 per hour. The increase applies from the first full pay period starting on or after 1 July 2018, for employees on the national minimum wage or a modern award. (F)
  • Employees in fast food and hospitality will have Sunday penalty rates reduced by 10% in both 2018-19 and 2019-20 bringing the final rate down to 125% and 150% respectively. (F)
  • Retail and pharmacy sector employees will have their take-home Sunday pay reduced by 15% each year until 2020-21. (F)
  • Payroll tax rebates for businesses employing apprentices and trainees will be extended and maintained at 50 per cent until 30 June 2019. (S)
  • The average WorkCover Queensland premium will be maintained at $1.20 per $100 of wages for the 2018-19 financial year. Small-to-medium size businesses employing apprentices will continue to receive a discount of 10 to 20 per cent and an early payment discount will increase from 3 per cent to 5 per cent. (S)

Taxation

  • Commencement of the ‘Personal Income Tax Plan’ with up to $530 for middle and lower income earners through a new tax offset and the top threshold of the 32.5 per cent tax bracket will be further increased to $90,000. (F)
  • Companies with a turnover between $25 million and $50 million will have their company tax rate reduced from 30% to 27.5%. Business with a turnover of less than $25 million already have a company tax rate of 27.5%. (F)
  • The goods and services tax (GST) will apply to retail sales of low value physical goods ($1000 or less) that have been imported to Australia and sold to consumers. (F)
  • Changes will affect companies accessing the R&D Tax Incentive with income years commencing on or after 1 July 2018. (F)
  • The Australian Taxation Office (ATO) will introduce the Single Touch Payroll (STP) for businesses employing 20 or more employees with them needing to report to the ATO each time they pay their employees. The information to be sent to the ATO includes employees' salaries and wages, allowances, deductions (for example, workplace giving) and other payments, pay as you go (PAYG) withholding and superannuation. (F)
  • The Government has streamlined GST reporting for small businesses by reducing the number of BAS GST questions to only three and scrapping the requirement for a 20 question worksheet. (F)
  • Small businesses will continue to be eligible for the instant asset write off initiative and will able to deduct purchases of eligible assets costing less than $20,000 first used or installed ready for use by 30 June 2019. (F)
  • Interstate online betting companies will face a 15 per cent wagering tax. (S)
  • Taxes for overseas property buyers will rise from 3 per cent to 7 per cent. (S)
  • Duty on cars worth more than $100,000 will rise 2 per cent. (S)
  • A 0.5 per cent rise in land tax on properties or property holdings worth more than $10 million. (S)

 
Cost of Living

  • Electricity bills in regional Queensland will decrease by 1.3 per cent for a typical customer on the main residential tariff (tariff 11) and 3.4 per cent for a typical customer on the main small business tariff (tariff 20). Origin Energy in SEQ where full retail competition exists have committed to reducing residential and small business electricity bills by 1.8 per cent. (S)
  • All State Government fees and charges including for licenses and motor vehicle registration will rise by 3.5 per cent. (S)
  • Council rates across Queensland will rise. Councils that have announced their increase for 2018-19 include: Brisbane (2.5%), Gold Coast (1.7%), Sunshine Coast (3.5%), Moreton Bay (2.9%), Ipswich (3.0%), Cairns (1.7%). (L)
  • The utility component of the water and sewerage bill will increase for example by 2.0 per cent in Greater Brisbane (Queensland Urban Utilities). Sunshine Coast and Noosa will increase by 0.6 per cent and Moreton Bay will reduce by 0.5 per cent (Unity Water). (L)  
  • The State Government’s bulk water component of a water and sewerage bill in SEQ council areas will reach a common price of $3.12 per kilolitre by 1 July 2020. Residents who have not yet reached the common price, will see the bulk water component of their total water bill increase by approximately 6 per cent per for Sunshine Coast and Noosa residents; 7.3 per cent for Redland residents; and 3.5 per cent for all other SEQ councils each year until they reach that price. (L)


Other

  • Businesses growing, producing, manufacturing, distributing, importing or selling food in retail stores in Australia will need to comply with the new Country of Origin Labelling laws. (F)
  • The Queensland plastic bag ban will commence on 1 July. No more lightweight plastic shopping bags for in-store or online customers. (S)
  • Individuals seeking to purchase their first home will be able to access specific voluntary contributions made in to superannuation after 1 July 2017. The voluntary contributions will be accessible by individuals from 1 July 2018.  Limits apply to the amount that individuals can contribute under this measure to $15,000 per year and $30,000 in total. (F)
  • The Queensland First Home Owners’ Grant will be retained but will decrease from $20,000 to $15,000 for contracts on newly constructed homes. (S)


F = Federal Government and applies across Australia
 S = State Government and applies across Queensland
 L = Local Government and applies across council area


The above is a general summary only and accordingly please do not hesitate to contact me for specific details or assistance on these or any other matter.

Queensland Budget faithfully delivers on election commitments but draws down on wealth of future generations

QEAS's special Queensland Budget 2018-19 Business Update can be found here

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